Competing relative/pegged-to-primary orders

LM3886

LM3886

I was reading the relative/pegged-to-primary order type offered by IB. If I understand it correctly, it generates an order that is better than NBBO by an offset and follows the change in NBBO. Imaging there are two users submitting this type of order to buy the same security, would they compete with each other by continuously bidding up the NBB? For example:

NBBO is $10.10 x $10.20
User A submits a relative order with offset $0.01, bidding at $10.11. Now NBBO is $10.11 x $10.20
User B submits a relative order with offset $0.01, bidding at $10.12. Now NBBO is $10.12 x $10.20
User A's order adjusts automatically to $10.13
User B's order adjusts automatically to $10.14
...

Obviously this can't happen in practice. What did I get wrong?
 
LM3886 said:
I was reading the relative/pegged-to-primary order type offered by IB. If I understand it correctly, it generates an order that is better than NBBO by an offset and follows the change in NBBO. Imaging there are two users submitting this type of order to buy the same security, would they compete with each other by continuously bidding up the NBB? For example:

NBBO is $10.10 x $10.20
User A submits a relative order with offset $0.01, bidding at $10.11. Now NBBO is $10.11 x $10.20
User B submits a relative order with offset $0.01, bidding at $10.12. Now NBBO is $10.12 x $10.20
User A's order adjusts automatically to $10.13
User B's order adjusts automatically to $10.14
...

Obviously this can't happen in practice. What did I get wrong?
More...
Why it is obvious that this can't happen in practice?

Be aware that the relative/pegged-to-primary order type does not adjust downwards last time I checked except if it is submitted to ISLAND.
 
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Maverick2608 said:
Why it is obvious that this can't happen in practice?
More...
Because otherwise the two users will bid up continuously and one of them will fill when the bid reaches NBO. The relative order becomes a market order effectively, which doesn't make sense.

Interesting exception for ISLAND, although I couldn't find info about that in IB's documentation.
 
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